Post Graduate Diploma in Financial Planning. Commodities Futures and Trading

Transcription

1 Post Graduate Diploma in Financial Planning Commodities Futures and Trading Maximum Marks: 100 Time Allowed: 3 hrs Roll No: Name: INSTRUCTIONS: 1. This Question Paper consists of 2 parts covering 5 sections. 2. Part I consists of objective type multiple choice questions for 70 marks. This part is sub-divided into 3 sections. Section 1 consists of 25 questions for 1 mark each. Section 2 consists of 10 questions for 3 marks each. Section 3 consists of 3 questions for 5 marks each. All the questions in part 1 have alternative options, of which only one is the correct answer. You are required to write the correct answer with proper reasoning and working, if required. 3. There is negative marking of 20% of each wrong answer of Part I 4. Part II consists of descriptive type questions. Section 4 consists of 5 questions for 3 marks each. Section 5 consists of 3 questions for 5 marks each. You are required to write the answer with proper stepwise explanation and working. 5. You are not allowed to leave your seat during the 1 st hour of the examination for whatso-ever reasons. 6. Sharing of resources is strictly prohibited. 7. Surrender any unauthorized material in your possession which you may have inadvertently brought into the examination room (including your MOBILE PHONES) before you start attempting your question paper. 8. Question paper must be returned to the invigilator after completion of exam along with answer sheet. All the very best!!!

2 PART I (OBJECTIVE) SECTION = 25 Marks Choose the most appropriate answer from the alternatives given. Each question carries 1 mark. 1. contracts are not standardized based on quantity or quality. a) Forward b) Futures c) Exchange-traded options 2. contract is an agreement between two parties to buy or sell a specified quantity and defined standardized quality of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract through regulated commodity exchanges. a) Forward b) Futures c) Exchange-traded option 3. In futures contracts, all of the following parameters are usually standardized by way of contract specification, except the a) Quantity b) Quality c) Price d) Tender Period / Delivery Period 4. Commodity Exchanges facilitate trading in derivatives to generally achieve the following important functions: a) Only Price Discovery b) Only Price Risk Management c) Both Price Discovery and Price Risk Management 5. Before the advent of nation-wide, online, multi commodity exchanges, the low volume in the regionalized exchanges in India can generally be attributed to the following reasons a) Excessive Government intervention in the form of subsidies, price control, compulsory purchasing and rationing in the agricultural markets. b) Influential and large commodity producers / traders acting as members / brokers of commodity exchanges and manipulation in the prices of commodities. c) Imperfect mechanisms & lack of standardization for physical delivery, settlement, documentation and warehousing arrangements d) All of the above Page 2 of 9

3 6. The following commodities are presently traded in Multi Commodity Exchange of India Ltd. a) Arecanut b) Silver c) Lead d) All of the above 7. The underlying asset of futures contracts based on freight rates, weather (temperature, rain, etc.) are usually classified as products. a) Precious b) Normal c) Unique d) Exotic 8. Direct purchases and sales of physical commodities for immediate consumption purpose can be made in markets. a) Spot b) Futures c) Forward 9. Which is the oldest commodity derivatives exchange in the world? a) New York mercantile Exchange (NYMEX) b) London Metal Exchange (LME) c) Tokyo Commodity Exchange (TOCOM) d) Chicago Board of Trade (CBOT) 10. Which was the first organized futures market in India? a) Bombay Cotton Trade Association Ltd. b) Bombay Bullion Association Ltd. c) Solvent Extractors of India Ltd. 11. Which of the following is / are classified as National-level Multi Commodities Exchange(s) in India? a) Multi Commodity exchange of India Ltd. (MCX), Mumbai b) National Board of Trade (NBOT), Indore c) Bombay Bullion Association 12. Commodities Market in India is regulated by that functions under the Ministry of. a) SEBI; Finance b) FMC; Consumer Affairs, Food and Public Distribution c) SEBI; Consumer Affairs, Food and Public Distribution d) FMC; Human Resources Development Page 3 of 9

4 13. The Commodity Exchanges in India are regulated and governed under the. a) Securities Contract (Regulation) Act, 1956 b) Forward Contracts (Regulation) Act, 1952 c) Companies Act, 1956 d) Depositories Act, Which of the following is a contract that gives the buyer (of the contract) the right but not the obligation to sell the underlying asset at a predetermined price? a) Put option b) Call option c) Future contract 15. reflects the expectations of the market about the availability of physical commodity in future. a) Conventional Yield b) Conventional Yield c) Constant Yield 16. refers to the maximum number of contracts that a trader may hold at a particular point of time. a) Closing out position b) Position limit c) Margins d) Initial margins 17. On 22 nd May 2006, Mr. Amitabh buys one contract of AUG Gold Futures at Rs per 10 gm. On 26 th May 2006, Mr. Amitabh sells one contract of AUG Gold Futures at Rs per 10 gm to square off his position. (Each gold futures contract size is 1 Kg.) What is the total profit or loss of Mr. Amitabh in this deal? a) (+) Rs. 10,000 b) (-) Rs. 50,000 c) (+) Rs. 20,000 d) (-) Rs. 1, 00, On 21 st April 2006, Mr. Shyam sells one contract of JUNE Brent crude oil futures at Rs per barrel. On 25 th April 2006, Mr. Shyam buys one contract of DEC Brent crude oil futures at Rs per barrel to square off his open position. (Each contract size is of 100 Barrels) What is the total profit or loss of Mr. Shyam in this deal? a) (-) Rs. 20,000 b) (-) Rs. 50,000 c) (+) Rs. 20,000 d) (-) Rs. 1, 00,000 Page 4 of 9

5 19. If the tick size of MCX Silver futures contract is Re. 1 then which of the following order cannot be accepted by the trading system? a) Rs per Kg b) Rs per Kg c) Rs per Kg d) Rs per Kg 20. If the tick size of MCX Steel Flat future contract is Rs. 10 then which of the following order can be not accepted by the system? a) Rs. 20,020 per MT b) Rs. 20,010 per MT c) Rs. 20,002 per MT d) Rs. 19,990 per MT 21. What is the value of one tick, if the tick size of MCX Rubber futures contract is Re. 1 and trading unit & base units is 1 MT & 100 Kg respectively? a) Rs. 100 b) Rs c) Rs. 10 d) Rs An individual member of MCX has given admission fee & initial deposit of Rs. 10 lakhs each and also given additional deposit of Rs. 10 lakhs for trading in futures. If MCX March Guarseed futures contract is trading at Rs per 100 Kg. (Trading unit of MCX March Guarseed futures contract is 10 MT), how many Guarseed futures contracts he/she can buy with the use of 85% of the available limit? (Margin requirement of Guarseed futures contract is 7%) a) 122 b) 121 c) 182 d) Mr. Manoj buys a 2 month European Call option on an underlying asset at strike price of Rs. 70 for a premium of Rs. 5. Upon expiration after 2 months, the closing price of the underlying asset is Rs. 85. What is the net pay off from the call option for Mr. Manoj? a) Rs. 20 b) Rs. 5 c) Rs. 10 d) Rs For a member, payment of delivery period margin imposed on a futures contract is inclusive of the initial margin for the future contract. Is this statement True or False? a) True b) False Page 5 of 9

6 25. The value of a Call option decrease with. a) Increase in Spot price will all other factors remaining the same b) increase in Volatility with all other factors remaining the same c) Decrease in Time to expiration with all other factors remaining the same d) All of the above are correct SECTION = 30 Marks Choose the most appropriate answer with showing reason/working. Each question carries 3 marks. 26. The Initial Security Deposit can be paid in which of the following forms? a) 100% Bank Guarantee (BG) and Fixed Deposit Receipt (FD) with an exchange approved bank. b) Minimum of 50% in Cash and Balance 50% by way of FD or BG with approved banks. c) Minimum of 25% in Cash and balance 75% by way of FD or BG with approved banks. d) Maximum of 50% in Cash and the balance 50% in the form of FD or BG with approved banks. 27. What will be transaction fee for June 2005 at MCX for average daily turnover of Rs. 50 Crore & total turnover of Rs Crore during the month? Average daily turnover Transaction fee per Rs. 1 lakh of turnover Upto and inclusive of Rs. 20Crore Rs. 4/- Above 20 cr. & upto 100 cr. Rs. 3/- a) Rs. 99, 000 b) Rs. 1, 32, 000 c) Rs. 3, 30, 000 d) Rs. 4, 40, Which of the following is not the function of the clearinghouse? a) Collect margins from members b) Guarantee validity of delivery c) Monitor delivery & settlement process d) Effect pay in & pay out 29. The end-of-day Mark to Market settlement on Commodity Futures contracts is done on a settlement period. a) T + 3 b) T + 1 c) T + 2 d) None Page 6 of 9

7 30. Any fluctuation / change in the import duty structure will have to be borne by the a) Buyer b) Seller c) Both the buyer & the seller d) Clearing Member 31. Odd lot at the time of delivery will be settled a) Only through cash settlement, based on due date rate upon expiry of contract b) After accepting the odd lot as a deliverable lot c) As specified in the contract specification. d) Only by cash based on due date rate but a penalty will be charged. 32. Futures involve daily cash flows, as contracts are required to be valued on basis. a) Average rate settlement b) Margin-to-make c) Mark-to-market d) Daily compounding 33. The settlement account of the member can be used to a) Issue cheque to outsiders for business expenses b) Transfer funds to the exchange for pay-in and payment of margins. c) Transfer money to the client account d) Both B and C 34. The trading unit in one Mentha oil contract is 360 Kg while the delivery unit is 720 Kg. During the delivery period of the contract a seller has an open position of 3240 Kg. If he wants to give delivery, then how much of his open position would be deliverable? a) 3240 Kg b) 2880 Kg c) 720 Kg d) 360 Kg 35. If a hedger in commodities market takes long hedge position, then a) He buys commodity futures contract to hedge cash position in physical commodities market. b) He sell commodity futures contract to hedge cash position in physical commodities market. c) He buys and sells commodity futures contract simultaneously. Page 7 of 9

8 36. A Speculator predicts based on market information that the prices of Gold will decline in the short and medium term, following which he would ideally. a) Buy Gold futures contract b) Sell Gold futures contract c) Buy Gold in the spot market 37. A member is permitted to take the exposure until a level where the margin requirement is of the total deposit. a) 75% b) Equal to or more than that c) Equal to or less than that d) 90% SECTION = 15 Marks Choose the most appropriate answer with showing reason/working. Each question carries 5 marks. 38. In May 2006, a textiles manufacturing company obtains an export order for delivery in the month of August The export order would require 200 candy of Long Staple Cotton to be purchased by the company in July The company decides to hedge by buying July Long Staple Cotton futures contract in the month of May The standard deviation of the change in the price per candy of long staple cotton is calculated as 3.6. The standard deviation of the change in the long staple cotton futures prices is 4 and the coefficient of correlation between the change in price of cotton and the change in the cotton futures price is 0.9. What is the optimal hedge ratio? a) 0.81 b) c) 1 d) On 26 th April 2006, a member has taken proprietary and client positions on June Guarseed futures contract. On his proprietary account, he bought 5000 June Guarseed futures contracts at Rs per 100 Kg. On the account of Client A he bought 2000 June Guarseed futures contracts at Rs per 100 Kg. and subsequently later in the day, sold 1000 June Guarseed futures contracts at Rs per 100 Kg. On the account of client B, he bought 1500 June Guarseed futures contracts at Rs Per 100 Kg. What is the outstanding position (number of June Guarseed futures contracts) on which the member would be required to pay margin on T + 1 basis? a) 7500 Long b) 5000 Long c) 8500 Long d) 3500 Long Page 8 of 9

9 40. If a member has long positions in two different contracts (of different expiry dates) of the same commodity, he is required to. a) Pay margins only on the contract nearing maturity b) Pay 50% margins on all the contracts c) Pay margins only on the contract maturing last d) Pay margins on each of the contracts separately PART II (SUBJECTIVE) SECTION 4 Answer any five questions. Each question carries 3 marks. 3 5 = 15 Marks 41. What is derivative contract? 42. What is cash settlement? 43. Who are the participants in forward/futures markets? 44. Explain stop loss order with an example. 45. Explain basis in detail. 46. Explain the strong features of financial markets. 47. What is bucketing? SECTION 5 Answer any three questions. Each question carries 5 marks. 3 5 = 15 Marks 48. Explain the features and requirements of commodity futures. 49. Explain the role of commodity exchanges in India. 50. What are the different types of margins payable on futures? 51. Explain all the following examples. a) Delivery unit b) Trading unit c) Base value unit Page 9 of 9